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Labor Market Reforms and Earnings Dynamics: the Italian Case

Author

Listed:
  • Mr. Davide Malacrino
  • Luigi Pistaferri

Abstract

This paper summarizes statistics on the key aspects of the distribution of earnings levels and earnings changes using administrative (social security) data from Italy between 1985 and 2016. During the time covered by our data, earnings inequality and earnings volatility increased, while earnings mobility did not change significantly. We connect these trends with some salient facts about the Italian labor market, in particular the labor market reforms of the 1990s and 2000s which induced a substantial rise in fixedterm and part-time employment. The rise in parttime work explains much of the rise in earnings inequality, while the rise in fixed-term contracts explains much of the rise in volatility. Both these trends affect the earnings distribution through hours worked: part-time jobs reduce hours worked within a week, while fixed-term contracts reduce the number of weeks worked during the year as well as increase their volatility. We find weak evidence that fixed-term contracts represent a "stepping-stone" to permanent employment. Finally, we offer suggestive evidence that the labor market reforms contributed to the slowdown in labor productivity in Italy by delaying human capital accumulation (in the form of general and firm-specific experience) of recent cohorts.

Suggested Citation

  • Mr. Davide Malacrino & Luigi Pistaferri, 2021. "Labor Market Reforms and Earnings Dynamics: the Italian Case," IMF Working Papers 2021/142, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2021/142
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    Citations

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    Cited by:

    1. Antoine Bertheau & Edoardo Maria Acabbi & Cristina Barceló & Andreas Gulyas & Stefano Lombardi & Raffaele Saggio, 2023. "The Unequal Consequences of Job Loss across Countries," American Economic Review: Insights, American Economic Association, vol. 5(3), pages 393-408, September.
    2. António Afonso & João Tovar Jalles & Zoe Venter, 2022. "Minimum Wage and Collective Bargaining Reforms: A Narrative Database for Advance Economies," CESifo Working Paper Series 9692, CESifo.
    3. Moritz Drechsel‐Grau & Andreas Peichl & Kai D. Schmid & Johannes F. Schmieder & Hannes Walz & Stefanie Wolter, 2022. "Inequality and income dynamics in Germany," Quantitative Economics, Econometric Society, vol. 13(4), pages 1593-1635, November.
    4. Claudia Fontanari & Antonella Palumbo, 2023. "Permanent scars: The effects of wages on productivity," Metroeconomica, Wiley Blackwell, vol. 74(2), pages 351-389, May.
    5. Giovanni Dosi & Andrea Roventini, 2022. "The Leopard: How a Post-Fascist Party Rose to Power in Italy," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(5), pages 270-271, September.
    6. Elin Halvorsen & Serdar Ozkan & Sergio Salgado, 2022. "Earnings dynamics and its intergenerational transmission: Evidence from Norway," Quantitative Economics, Econometric Society, vol. 13(4), pages 1707-1746, November.
    7. Francesca Flamini, 2023. "The Role of the Status-Quo in Dynamic Bargaining," Games, MDPI, vol. 14(3), pages 1-20, April.
    8. Savoia, Ettore, 2023. "The effects of labor income risk heterogeneity on the marginal propensity to consume," Working Paper Series 2866, European Central Bank.
    9. Ivan Lagrosa, 2022. "Income dynamics in dual labor markets," Working Papers wp2022_2209, CEMFI.
    10. Krahé, Max, 2023. "Understanding Italy's stagnation," Papers 277913, Dezernat Zukunft - Institute for Macrofinance, Berlin.

    More about this item

    Keywords

    earnings mobility; earnings inequality; earnings distribution; labor market market trend; earnings change; Wages; Labor markets; Human capital; Income inequality; Income; Europe; Global;
    All these keywords.

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